Time Warner Cable-CBS Feud Underscores Need for Congressional Reform

Blackouts should be prohibited during negotiations

This is a guest column from Chad Gutstein, chief operating officer at Ovation, a cable channel devoted to arts and entertainment.

Television is a public good. We forget that sometimes, but it’s true. But you wouldn’t know it based on the spectacle created by CBS and TimeWarner Cable duking it out for billions of dollars and blacking out signals to millions of households in New York, Los Angeles, Dallas and other markets across the country.

Back in the 1990s, Congress passed a law requiring cable companies to negotiate with broadcasters for the right to carry their signals. For many years, broadcasters eschewed asking cable companies for money and focused on launching cable networks. Over time, giant media conglomerates were built that combined broadcast stations in the nation’s biggest markets with robust lineups of cable networks.

These conglomerates now have extraordinary leverage. When negotiating with cable companies, they threaten to withhold either popular cable networks or broadcast channels, or both, unless the distributors agree to pay steep rate increases. Programmers also force distributors to carry and over-pay for repetitive networks consumers don’t want or need, often using this “real estate” as a placeholder until the programmer can re-brand the network into something new. Cable companies acquiesce to these rate hikes since they feel they can pass the costs on to customers.

As unfair as that system of price inflation is to consumers, it is now actually getting worse. And for the first time, the number of pay TV households has stopped growing; Nielsen now counts a meaningful number of “zero TV” households.

In response, companies like Time Warner Cable have done two things. First, they have tried to save tiny sums of money by dropping smaller independent networks like my network, Ovation – and in so doing, have further homogenized content on the dial, hurting independent programmers and ensuring that viewers have even less choice as they are asked to pay more money.

Second, Time Warner Cable and others have started drawing a hard line in the sand against the rising costs of broadcast television. This is TV that is supposed to be “free” to all Americans. The current blackout of CBS is just the latest in a long series of such blackouts that trample on the rights of Americans to get the “free TV” we are owed.

So customers’ bills get bigger. Their selection gets smaller. They face inexplicable blackouts. And if all that wasn’t enough, during these fights, viewers have to endure a barrage of perplexing political-style ads asking them to take sides between the rich and the wealthy.

CBS is right to point out that Time Warner Cable has been one of the most combative distributors, throwing off networks like Ovation, CBS and many others. But the bigger issue is the system and the antiquated laws that govern it. Congress needs to reform the rules of the game so that consumers’ interests come first.

A reform agenda would prohibit the blackout of signals to viewers during negotiations, provide meaningful protections for independent programmers, and restrict wholesale bundling practices so that media conglomerates can’t use their leverage to drive up rates that ultimately get passed on to consumers. Above all, it would empower the FCC to more aggressively protect the public interest.

Whether Time Warner Cable or CBS ultimately win, your cable bill will still go up and Ovation, America’s only arts network, will still be blacked out to Time Warner Cable subscribers. In which case, the American people will be saying “heads you win, tails I lose.”

Tonight, millions of Time Warner Cable households will see a blank screen when they turn to their local CBS station. It is a fitting symbol of a system that is broken. It’s time for a fix.

Listen to me Time Warner Cable !!! There are no other channels like Ovation. Not even A & E offer
us what they did have years ago. Where else do you get 5 beautful performances of The Nutcracker
Suite at Christmas ??? Not even my PBS station offers that progam anymore. Even my grandchildren
loved to watch Ovation on my T.V. Ovation offers more Music, Art, & BBC shows than any other
network I receive. Please listen to your subsribers . Thanks. Rose

This standoff is an abomination, and a case could be made that Time Warner, by acting in its own self-interest, is also — coincidentally, rather intentionally — acting in the best interests of its subscribers by standing up to CBS’ excessive price increase demands.

However, as to how we arrived at these unfortunate stalemates in the first place, the truth is that the cable industry brought this nightmare upon itself — as well as its customers — by lobbying Congress into deregulating the industry.

What cable wound up receiving in exchange for rate deregulation is Retransmission Consent — i.e., the endless headache of having to renegotiate every few years with broadcast stations and groups for the right to carry their signals. Unless someone can come up with a better answer than these ongoing conflicts, I would suggest that the only solution is RE-REGULATION.

If you really stop think about it, wasn’t the situation a lot better BEFORE passage of the Cable Television Protection and Competition Act of 1992?

What a great article and explanation of the situation. I agree completely that blackouts should not be allowed during negotiations and it is not the customers job to fight TWC’s battle. TWC’s position that they are looking out for the cost to the subscriber is ludicrous. Their profits went up the 2nd quarter this year by 6.4% despise losing 190K subscribers. I pay $225 a month and that includes payment for Showtime and cutting us off midway through the final season of Dexter is a clear message to subscribers that TWC does not care one whit about us.

In response to an earlier comment about competition and capitalism, you do not understand the laws regarding cable and content providers. I WISH I had my choice between cable companies however only ONE is allowed to cover a particular area. There is no competition allowed. In fact, like with the utility companies, it is a monopoly. In other words, it’s exactly the opposite of a marketplace which has competition. My cable choices are: Time Warner or Nothing. Sure there is a satellite provider but that’s a different kind of service & apparently quite unreliable.

This is a very interesting article and I agree that it is time for reform. The escalating prices and continuation of media monopolies is astounding. Paying for Cable TV service once meant getting good reception and access to channels filled with interesting, uncensored individual programming without the annoyance of commercial advertising. Any channel that sells air time to commercial advertisers should not be able to also charge exorbitant fees to retransmit their channel via cable service providers. If CBS and the other commercial broadcasters want to charge these retransmission fees, they should stop subjecting viewers to advertisements! I also agree that these networks should not be able to bully the cable service providers into purchasing stations they would otherwise have no interest in having take up space on their channels. I am glad that a Cable TV service provider is taking a stand and making viewers and subscribers aware of the abusive behavior of these huge network broadcasters.

The public isn’t entitled or owed “free tv.” You want to receive broadcast tv, use an antennae. You don’t want to use and antennae and use your cable instead, you’ll have to pay for it via your cable provider packages. While I like the idea of cable customers paying ala carte for channels, it will lead to a hell of a lot less channels. Smaller channels won’t be purchased by customers unless they can sample them first. So many smaller channels only survive because they’re bundled with more popular ones. Who would chose to watch a channel like Ovation unless it was bundled in with other channels? Why would a cable provider carry a channel like Ovation, unless they were being paid to do so?

I haven’t had cable in years. Online, rentals, or purchases for me. I’m not sure how much the system can change. I don’t like being limited in my choice of cable/internet provider. All kinds of deals have been struck for different districts and which provider will service them. That’s what sucks. I chose to get away from the system as much as possible. I pay for my internet provider (again, not much choice regarding who it is) and just pick and choose what I’ll watch. And I don’t really have to deal with advertisements, either.

Hmmm…self-serving article? I would say a resounding yes. I don’t recall a single post in Variety or other trades when TWC dropped the very low viewed Ovation.

On a more realistic note…who cares if TWC or anyone else “drops” a broadcast network. It is available for free in those markets…$15 will get you an antenna.

The only annoyance is that CBS refuses to license content online to Hulu…and as long as you don’t have TWC for internet, just go to CBS.com

This is only a big story because the two sides have a vested interest in making it a big story…as noted, more and more Zero households are coming into being…and the trend is accelerated by nonsense like this “dispute.”